Jobs boom in some northern cities masks real inequality

By Luke Raikes

People have very different experiences of the economy
depending on where they live and work. New research
from the Resolution Foundation is a timely reminder
of quite how different that experience is: it shows
that some northern cities have seen large increases
in employment rates, and that London accounted for a
third of net employment growth since 2008. But while
some low-employment areas have also caught up, there
are some new divides emerging - in rural areas
especially.
Our own research at the Institute for Public Policy
Research has shown that real weekly pay has fallen at
different rates across the country since 2008: in the
north by £21; but in Northern Ireland it actually
rose (from a relatively low level) by £8. These
differences may have passed people by, as politicians
tend to talk about national level statistics. But it
is these local and regional statistics that more
accurately reflect the real-life economies people
experience.
Central government rarely spends time focusing on the
major differences between places, or thinking about
how a regional economy works as a whole. Take London
- the site of a jobs boom that no other region can
hope to match. Why is it, then, that London has the
highest rates of poverty and inequality? Why are
Londoners more likely to report low wellbeing or high
levels of anxiety? A large part of the answer to this
is, of course, London's unique housing crisis. But
this crisis doesn't occur in isolation from the
labour market: it is closely linked to the jobs
growth the capital has seen.
In contrast, there are many areas outside the capital
that saw a decline in jobs during the period - where
the rate of deprivation is similar to London's but
with a fundamentally different cause. Often it is the
case that industries have declined, and Westminster
has done little to help - at times in the past,
governments have actively encouraged this process.
It is important to consider these two different
economies together and understand why their paths
have diverged so dramatically. And it becomes clear
that central government has boosted London's economy,
with a cost to industries and people in the rest of
the country. But what often isn't discussed is that
this has also cost people living in London.
Fundamentally this highlights how inadequate central
government has been at managing our economy over the
last few decades.
Westminster tends to focus on those things that
regions have in common and that need to be resolved
across the country: our regions share the same
regulations and laws, so zero-hours contracts,
poverty pay and other issues related to job quality
are often the focus. But other countries have a
completely different approach. The north of England
is similar to the Rhine-Ruhr valley in Germany: it
also has a history of heavy manufacturing and coal
mining. But here the similarities end: this region of
Germany has taken a very different path to the north
of England. Now the Rhine-Ruhr region has rates of
productivity that far outstrip almost all northern
regions. The north of England is left with rates of
productivity that compare to East Germany: an area
that has a very different and much more challenging
economic history.
One of the major reasons for this is that the Rhine-
Ruhr's economy isn't managed solely by Berlin as
northern England's economy is by London. The state of
North-Rhine Westphalia has significant economic
power, and a high degree of tax-setting autonomy,
too. That means it has been able to set out an
industrial strategy of its own, and helped to adapt
and modernise its industrial base.
Thankfully, policy in the UK is moving in the right
direction, albeit very slowly. There are local
industrial strategies being drawn up across the
country, with Greater Manchester, the West Midlands
and the Oxford-Milton-Keynes-Cambridge corridor
receiving extra attention from central government.
This is an encouraging development. But it needs to
go much further if the UK's regions are to adapt to
the significant upheavals coming in the future. Local
industrial strategies must be backed by real devolved
power - above and beyond the small packages of powers
already devolved. Greater Manchester and other city
and county regions should be able to support their
industries with more significant budgets and powers
over transport, education and skills.
But the other missing link is at the larger tier of
geography. Some areas of economic policy -
innovation, trade and investment, and inter-city
transport - are most effective if they are held at
larger, regional geographies: North-Rhine Westphalia
is a region of 18 million people; Greater Manchester
has only 2.8 million. England's regions need to work
at a larger scale better and more often, so
industrial strategies for the "northern powerhouse"
and the Midlands engine regions are needed, too.
Westminster needs to urgently adjust to the reality
of the economy as people experience it in different
areas across the country. When they do so, they
should realise that they need to offer not just
national solutions, but real devolution so that
communities can solve their own problems and build
their own strengths.